As discussed in previous Alerts, on March 11, 2016 CMS published a proposed rule aimed at reforming how Medicare pays for drugs covered under Part B. CMS states that its main objective is to ensure that physicians are prescribing the most effective prescription drugs in order to improve patient treatment and to rein in drug spending.

Under the proposed rule, CMS will implement a two-phase payment model over five years. In Phase I, CMS will decrease the add-on payment included in physician reimbursements for administering Part B drugs from 6 percent to 2.5 percent, plus a $16.80 flat fee. This provision, the Center argues, would reduce provider incentives to prescribe higher-cost drugs for purposes of achieving higher payment.

In Phase II, CMS will test value-based pricing strategies, including reference pricing, indications-based pricing, risk-sharing agreements based on outcomes, discounting or eliminating patient cost sharing, and feedback on prescription patterns and online decision support tools. The Center supports the Phase II goals, which are aligned with broader efforts to transition Medicare from volume-based to value-based payment system and to incentivize high-value, evidence-based clinical decision-making.